Financing with an additional mortgage on the parents' house

Hello,

[how] does the following scenario work concretely regarding banks, notary, land register?

A married couple buys a house and finances it through a classic annuity loan with a first-ranking land charge on this house at bank A. Let's assume an 80% loan-to-value ratio. The wife's parents own a burden-free single-family home and offer the children to use the still existing land charge (fully repaid but not yet deleted) at bank B to take out another loan. The children expect better interest conditions this way, because they would then only need to finance 60% loan-to-value at bank A.

How should the children proceed best now? What steps would need to be taken to take out the second loan at bank A or also bank C?

If the land charge is with bank B, but the loan is to be taken out with A or C, the property must be transferred/assigned. This already involves costs.

Then it must be clarified how it will proceed. The second property is liable for all liabilities from the entire financing (broad agreement) or only for a certain part (narrow agreement, actually two segmented loans).

Then there may also be costs for the second valuation (parents' house), as the old valuation is certainly too old.

Best way: ask the bank, they decide what they want, how and where, as this procedure unfortunately overwhelms many young advisors (at certain banks and intermediaries). Unfortunately, that’s how it is. Find an advisor who has been in the field for 10 years, then you have the certainty that he knows what he is doing.

For a rough calculation: 100/(BW House A + BW House B)*loan amount = loan-to-value ratio

The properties must of course together correspond to the loan amount and the loan amount may also be split between both houses without exceeding 60% BW.

Basically, I would say the parents borrow the money and give it to the children as equity. The problem, however, is that the banks only lend money for a specific purpose. Otherwise, the interest rates are significantly higher. The problem with the matter, though, is that if the financing goes wrong, both houses are at risk. And I also hardly believe that the interest advantage would be so great that the risk is worth it.

The problem, however, will be that banks only lend money for a specific purpose. Otherwise, the interest rates are significantly higher.

Where did you get that myth from? As long as repayment is manageable and security is provided, the interest rate is the same.

Besides, the loan is purpose-bound anyway: home financing children

BUT BIG WARNING! If repayment is to parents (especially parents-in-law), the interest portion could be subject to tax! Consult a tax advisor for this option!

The interest advantage is about 20 BP, with 200,000 euros initially saving 400 euros per year, slowly decreasing depending on repayment. He has to calculate the break even himself.

Hello,

that would be capital raising on a mortgage-free property. Purpose unbound. The borrowers could be either you or the parents.

Big BUT: Are there siblings who know about it (keyword family peace). Do you really want that and involve the parents? I wouldn’t want that. Do the parents know what they are getting into? They are liable with the property.